1
00:00:03,279 --> 00:00:07,640
Speaker 1: Broadcasting live to New York, Bloomberg eleven, Brio to Washington,

2
00:00:07,720 --> 00:00:12,720
Speaker 1: d C, Bloomber to Boston, Bloomberg twelve to San Francisco,

3
00:00:12,840 --> 00:00:17,000
Speaker 1: Bloomberg nine six to the Country series Exam General one

4
00:00:16,680 --> 00:00:20,120
Speaker 1: nine and around the globe the Bloomberg Radio plus Stapp

5
00:00:20,160 --> 00:00:24,240
Speaker 1: and Bloomberg dot com. This is taking Stock. Coming up

6
00:00:24,280 --> 00:00:27,160
Speaker 1: on taking Stock, a story about Puerto Rico. U S

7
00:00:27,200 --> 00:00:30,880
Speaker 1: Treasury Secretary Jacob Blue warning that Puerto Rico may need

8
00:00:30,920 --> 00:00:34,239
Speaker 1: a US government bailout if the Congress doesn't pass a

9
00:00:34,240 --> 00:00:37,520
Speaker 1: bill that helps the island restructure its debts and prevent

10
00:00:37,560 --> 00:00:41,640
Speaker 1: a series of cascading defaults. Will investigate right now. Let's

11
00:00:41,680 --> 00:00:43,680
Speaker 1: go to Catherine Calgary in the Bloomberg newsroom for a

12
00:00:43,760 --> 00:00:47,840
Speaker 1: Bloomberg business flash. Thank you, PIM and Bloomberg. Taking Stock

13
00:00:47,840 --> 00:00:49,879
Speaker 1: has brought to you by Sector Spider e t S.

14
00:00:49,960 --> 00:00:51,839
Speaker 1: Why buy a single stock when you can invest in

15
00:00:51,840 --> 00:00:55,440
Speaker 1: the entire sector? Visit Sector spdrs dot com or call

16
00:00:55,520 --> 00:00:58,680
Speaker 1: one six six Sector e t S. The stock market

17
00:00:58,720 --> 00:01:01,080
Speaker 1: is clowing back some of the owned at lost last week.

18
00:01:01,360 --> 00:01:04,080
Speaker 1: The benchmarks are advancing, helped by gains in banks and

19
00:01:04,120 --> 00:01:08,520
Speaker 1: consumer discretionary companies. Traders have lowered their expectations for higher

20
00:01:08,520 --> 00:01:11,880
Speaker 1: interest rates in June after data showing a manufacturing flow

21
00:01:12,000 --> 00:01:15,559
Speaker 1: last month. Investors are awaiting the government's monthly jobs report

22
00:01:15,640 --> 00:01:18,959
Speaker 1: this Friday. Drew Maddis, chief economists at UBS, and his

23
00:01:19,120 --> 00:01:23,000
Speaker 1: expectations for the April employment report well, probably get two hundred,

24
00:01:23,000 --> 00:01:25,560
Speaker 1: and we'll see the unplant rate drop, and perhaps more importantly,

25
00:01:25,560 --> 00:01:27,800
Speaker 1: we should see some wage gains. Uh and I think

26
00:01:27,840 --> 00:01:30,959
Speaker 1: that combination will be quite favorable. We check the markets

27
00:01:30,959 --> 00:01:33,480
Speaker 1: every fifteen minutes throughout the trading day on Bloomberg Radio.

28
00:01:33,720 --> 00:01:36,640
Speaker 1: Down Industrial average is up one nine points six cents

29
00:01:36,640 --> 00:01:39,600
Speaker 1: of a percent, trading at seventeen thousand, eight hundred eighty

30
00:01:39,600 --> 00:01:42,320
Speaker 1: two S and P five hundred, up fifteen points seven

31
00:01:42,319 --> 00:01:44,959
Speaker 1: tenths of a percent of two thousand, seventy nine. The

32
00:01:45,040 --> 00:01:47,400
Speaker 1: NASTAC is higher by thirty eight points eight tenths of

33
00:01:47,440 --> 00:01:50,440
Speaker 1: a percent, trading at forty eight thirteen West Texas. In

34
00:01:50,520 --> 00:01:52,840
Speaker 1: the media, crude oil down a dollar five of barrel

35
00:01:52,880 --> 00:01:55,919
Speaker 1: two point three percent to forty four eighty seven. Spout

36
00:01:55,960 --> 00:01:58,200
Speaker 1: gold is up two dollars, announced at twelve ninety two

37
00:01:58,240 --> 00:02:01,040
Speaker 1: fifty ten. Your Treasury downs seven thirty seconds with the

38
00:02:01,080 --> 00:02:04,400
Speaker 1: yield of one point eight five percent. Among today's top

39
00:02:04,440 --> 00:02:07,720
Speaker 1: business stories, construction spending increased in March to its highest

40
00:02:07,800 --> 00:02:10,519
Speaker 1: level in more than eight years. Gains in home building

41
00:02:10,520 --> 00:02:14,160
Speaker 1: a non residential construction offset a drop in government projects.

42
00:02:14,680 --> 00:02:17,760
Speaker 1: American Express is set spending more money to attract cardholders.

43
00:02:18,000 --> 00:02:20,880
Speaker 1: That's the word from Chief executive Ken Shinal. He said.

44
00:02:21,000 --> 00:02:23,920
Speaker 1: AMEX is actively seeking retail partners as it works with

45
00:02:23,960 --> 00:02:27,840
Speaker 1: a great sense of urgency to improve its results. Valiant

46
00:02:27,840 --> 00:02:32,320
Speaker 1: Pharmaceuticals International was retreating again today, down as much as

47
00:02:32,560 --> 00:02:36,000
Speaker 1: after billionaire Warren Buffett criticized the drug maker strategy at

48
00:02:36,040 --> 00:02:40,000
Speaker 1: the annual meeting of his company, Berkshire. Half Away and

49
00:02:40,000 --> 00:02:41,480
Speaker 1: now let's get an update of some of the other

50
00:02:41,520 --> 00:02:46,040
Speaker 1: stories were following on Bloomberg Radio today. Catherine, thank you

51
00:02:46,280 --> 00:02:49,160
Speaker 1: from the Bloomberg news Room. I'm Mark Crumpton. This news

52
00:02:49,200 --> 00:02:51,920
Speaker 1: update is brought to you by the Jeep Grand Cherokee,

53
00:02:52,040 --> 00:02:55,960
Speaker 1: the most awarded suv ever. The Grand Cherokee continues to

54
00:02:56,040 --> 00:02:59,960
Speaker 1: raise the bar with its luxurious interior and legendary four

55
00:03:00,080 --> 00:03:04,520
Speaker 1: by for capability. Drive one at your local Jeep dealer Today.

56
00:03:04,639 --> 00:03:07,120
Speaker 1: It was a day off for most kids in Detroit's

57
00:03:07,120 --> 00:03:10,799
Speaker 1: public school system. The Teachers Union encouraged members to call

58
00:03:10,840 --> 00:03:13,560
Speaker 1: in sick as a protest of funding issues at the

59
00:03:13,600 --> 00:03:17,600
Speaker 1: financially struggling district. Kimberly Love is a teacher at Detroit's

60
00:03:17,639 --> 00:03:20,560
Speaker 1: Class Tech High School. We have acted in good faith

61
00:03:20,560 --> 00:03:23,200
Speaker 1: as educators, and now it's time for was to really

62
00:03:23,240 --> 00:03:27,080
Speaker 1: stand strong in solidarity to send a message to district

63
00:03:27,080 --> 00:03:31,600
Speaker 1: officials into the state that is enough. In March, emergency

64
00:03:31,720 --> 00:03:34,600
Speaker 1: funding was made available to keep the Detroit Public School

65
00:03:34,680 --> 00:03:38,360
Speaker 1: District operating through the end of the school year. Secretary

66
00:03:38,400 --> 00:03:41,440
Speaker 1: of State John Kerry wants Russia to help broker a

67
00:03:41,560 --> 00:03:45,280
Speaker 1: nationwide ceasefire in Syria. He spoke to reporters as he

68
00:03:45,400 --> 00:03:48,600
Speaker 1: arrived in Geneva to start another round of peace talks.

69
00:03:48,760 --> 00:03:52,720
Speaker 1: We are talking directly with the Russians even now. The

70
00:03:52,800 --> 00:03:57,040
Speaker 1: hope is that progress. Last week, dozens of people were

71
00:03:57,160 --> 00:04:00,640
Speaker 1: killed in the city of Aleppo when Syrian playing is attacked.

72
00:04:01,120 --> 00:04:05,760
Speaker 1: Governor Chris Christie has rejected legislation tightening requirements that new

73
00:04:05,840 --> 00:04:10,240
Speaker 1: Jersey employers pay workers doing the same job equally regardless

74
00:04:10,240 --> 00:04:14,280
Speaker 1: of gender. Governor Christie conditionally vetoed the measure today, saying

75
00:04:14,360 --> 00:04:19,080
Speaker 1: state law already banned gender based pay discrimination. Global News

76
00:04:19,160 --> 00:04:21,800
Speaker 1: twenty four hours a day, powered by our twenty four

77
00:04:21,880 --> 00:04:25,320
Speaker 1: hundred journalists in more than one hundred fifty news bureaus

78
00:04:25,440 --> 00:04:29,400
Speaker 1: around the world. From the Bloomberg Newsroom, I'm Mark Crumpton. Catherine,

79
00:04:31,520 --> 00:04:33,279
Speaker 1: thank you, And now let's get an update of those

80
00:04:33,279 --> 00:04:36,240
Speaker 1: equity benchmarks. Down. Industrial average up one hundred six points

81
00:04:36,279 --> 00:04:38,760
Speaker 1: at seventeen thousand, eight hundred eighty s and t f

82
00:04:38,800 --> 00:04:41,400
Speaker 1: I founded up fourteen points at two thousand seventy nine.

83
00:04:41,720 --> 00:04:45,280
Speaker 1: The nastack is up thirty eight points at thirteen. And

84
00:04:45,320 --> 00:04:50,120
Speaker 1: that's a Bloomberg Business flash. You're listening to Taking Stock

85
00:04:50,240 --> 00:04:54,080
Speaker 1: with Kathleen Hayes and Pim Fox on Bloomberg Radio. The

86
00:04:54,240 --> 00:04:58,000
Speaker 1: Governor of the Commonwealth of Puerto Rico, Alejandro Garcia Pattillo,

87
00:04:58,160 --> 00:05:03,200
Speaker 1: warned that port Rico bond investors will face a cascade

88
00:05:03,760 --> 00:05:06,560
Speaker 1: of the faults beginning in July unless the US Congress

89
00:05:06,640 --> 00:05:12,440
Speaker 1: passes legislation that would facilitate a restructuring of the commonwealth's debt. Well,

90
00:05:12,720 --> 00:05:15,800
Speaker 1: how likely is that. Let's find out from David Towell.

91
00:05:15,880 --> 00:05:19,320
Speaker 1: He is the president and the co founder of Magnun Capital. David,

92
00:05:19,360 --> 00:05:21,080
Speaker 1: thank you very much. For being with us. So give

93
00:05:21,160 --> 00:05:24,200
Speaker 1: us an update and and any prognosis you can for

94
00:05:24,240 --> 00:05:27,920
Speaker 1: this patient that at least today is not paying four

95
00:05:28,720 --> 00:05:32,120
Speaker 1: two million dollars from the Government Development Bank on interest

96
00:05:32,200 --> 00:05:36,960
Speaker 1: that is due. Uh. So this is just another i'd say,

97
00:05:37,320 --> 00:05:41,440
Speaker 1: data point on the timeline here for Puerto Rico. UM

98
00:05:41,520 --> 00:05:44,839
Speaker 1: it is seemingly a point in time that the Congress

99
00:05:44,880 --> 00:05:49,920
Speaker 1: didn't particularly think was so significant. The real um point

100
00:05:49,960 --> 00:05:52,839
Speaker 1: in time that is at this point absolutely critical is

101
00:05:53,080 --> 00:05:56,960
Speaker 1: a July one date where roughly two billion dollars of

102
00:05:56,960 --> 00:06:00,520
Speaker 1: total payments are due, and more importantly of those payments,

103
00:06:00,720 --> 00:06:04,080
Speaker 1: uh it will be potentially the first payment on general

104
00:06:04,120 --> 00:06:08,320
Speaker 1: obligations bonds that the Commonwealth could code to default on.

105
00:06:08,920 --> 00:06:13,440
Speaker 1: Why is it so critical to understand the value or

106
00:06:13,480 --> 00:06:17,240
Speaker 1: the difference of a general obligation bond and let's say

107
00:06:17,320 --> 00:06:23,880
Speaker 1: something from the Commonwealth Development Bank. Oh sure. So, as

108
00:06:24,000 --> 00:06:29,240
Speaker 1: with the even corporate capital structures, their varying priorities on

109
00:06:29,360 --> 00:06:32,640
Speaker 1: debt UM and when it comes to a Commonwealth like

110
00:06:32,720 --> 00:06:37,680
Speaker 1: this one, UM, some bonds or some uh debt is

111
00:06:37,880 --> 00:06:40,799
Speaker 1: guaranteed by certain revenue streams. In the case of general

112
00:06:40,800 --> 00:06:44,720
Speaker 1: obligations bonds, they're actually guaranteed by the Constitutional Puerto Rico.

113
00:06:45,480 --> 00:06:48,400
Speaker 1: Exactly what that means to the extent that they were

114
00:06:48,480 --> 00:06:51,280
Speaker 1: default on that and exactly who would be able or

115
00:06:51,279 --> 00:06:54,920
Speaker 1: which classes of bondholders would be entitled to which revenue

116
00:06:54,920 --> 00:06:58,960
Speaker 1: streams that the commonwealth produces is actually a question that

117
00:06:59,279 --> 00:07:02,880
Speaker 1: hasn't been an sard uh. And so therefore, you know,

118
00:07:02,960 --> 00:07:06,880
Speaker 1: missing a payment on those geo's in July would actually

119
00:07:06,920 --> 00:07:10,640
Speaker 1: bring the legal issue to a head um and make

120
00:07:11,160 --> 00:07:15,720
Speaker 1: you know, play out very disastrously uh for the commonwealth itself.

121
00:07:15,720 --> 00:07:18,360
Speaker 1: Forget about the bond holders for a second. Uh. You know,

122
00:07:18,400 --> 00:07:23,480
Speaker 1: the commonwealth itself is under severe or financial stress right now,

123
00:07:23,760 --> 00:07:25,720
Speaker 1: and the citizens of the island you know, need to

124
00:07:25,720 --> 00:07:31,120
Speaker 1: get uh you know necessary uh, infrastructure necessary uh and

125
00:07:31,240 --> 00:07:34,800
Speaker 1: basic you know services provided um, and that will further

126
00:07:34,880 --> 00:07:36,840
Speaker 1: come under strain, you know, to the extent of the

127
00:07:36,920 --> 00:07:40,600
Speaker 1: July first payment is well, just to highlight what you said,

128
00:07:40,800 --> 00:07:45,520
Speaker 1: Governor Padilla, he said that he's going to be focusing

129
00:07:45,560 --> 00:07:50,480
Speaker 1: on providing essential services rather than pay creditors. This is

130
00:07:50,480 --> 00:07:52,600
Speaker 1: so far the biggest to fall. I guess you get

131
00:07:52,600 --> 00:07:56,120
Speaker 1: attention when it's a billion dollars of a misspayment rather

132
00:07:56,160 --> 00:08:00,400
Speaker 1: than just FO two million it's not only that, uh,

133
00:08:00,560 --> 00:08:05,480
Speaker 1: you know, today's bonds um, you know don't allow the

134
00:08:05,560 --> 00:08:09,680
Speaker 1: creditors uh necessarily to bring the Commonwealth to a halt

135
00:08:10,440 --> 00:08:15,360
Speaker 1: uh the missed g O payment however, um, you know,

136
00:08:15,440 --> 00:08:20,240
Speaker 1: if interpreted favorably for those general obligation bondholders, could actually

137
00:08:21,040 --> 00:08:26,440
Speaker 1: disallow PADA from redirecting funds. Uh if the geos are

138
00:08:26,480 --> 00:08:31,640
Speaker 1: successful in a litigation which says under the Commonwealth Constitution

139
00:08:32,320 --> 00:08:36,400
Speaker 1: that they must be paid well. Frankly, general obligation bondholders

140
00:08:36,440 --> 00:08:40,360
Speaker 1: may have an entitlement that could be very much higher

141
00:08:40,440 --> 00:08:44,400
Speaker 1: than you know, the necessary infrastructure of the Commonwealth, or

142
00:08:44,440 --> 00:08:48,520
Speaker 1: at least, you know, anything beyond the absolutely most bare

143
00:08:48,559 --> 00:08:52,120
Speaker 1: bones basic needs of the Commonwealth. What about forty seven

144
00:08:52,200 --> 00:08:55,640
Speaker 1: cents on the dollar? This, I understand is the agreement

145
00:08:55,760 --> 00:08:59,800
Speaker 1: or the basis for an agreement by the government Development

146
00:09:00,600 --> 00:09:07,000
Speaker 1: which defaulted today and some of their hedge funds bond holders. Yeah,

147
00:09:07,360 --> 00:09:10,640
Speaker 1: there was a news report of regarding that regarding a

148
00:09:10,760 --> 00:09:16,080
Speaker 1: certain group of bondholders comprising less than of the total

149
00:09:16,120 --> 00:09:19,920
Speaker 1: outstanding bonds UM. And it also says that nothing is

150
00:09:19,960 --> 00:09:22,240
Speaker 1: definite and that they would use the next thirty days,

151
00:09:22,640 --> 00:09:25,520
Speaker 1: you know, to further discuss and they could obviously, you know,

152
00:09:25,559 --> 00:09:28,720
Speaker 1: in order to complete restructuring of those GDB bonds, they'd

153
00:09:28,760 --> 00:09:32,120
Speaker 1: need buy in from the remaining seventy plus percent who

154
00:09:32,120 --> 00:09:36,040
Speaker 1: are not currently you know, part of that tentative agreement. Um,

155
00:09:36,080 --> 00:09:40,280
Speaker 1: it's all well and good, but unfortunately we've we've seen

156
00:09:40,320 --> 00:09:43,440
Speaker 1: a lot of this in this situation until this point,

157
00:09:44,000 --> 00:09:47,640
Speaker 1: which is discussions and you know, tentative agreements and understandings

158
00:09:47,640 --> 00:09:50,920
Speaker 1: around frameworks or you know, proposals being put forward and

159
00:09:50,960 --> 00:09:55,040
Speaker 1: that hasn't gotten the Commonwealth anywhere. And at this time,

160
00:09:55,320 --> 00:09:58,760
Speaker 1: you know, they're running on borrowed time. Uh, there really

161
00:09:58,880 --> 00:10:03,240
Speaker 1: isn't time left to go ahead and have discussions with

162
00:10:03,320 --> 00:10:07,079
Speaker 1: a minority of bondholders in the hope that a consensus

163
00:10:07,160 --> 00:10:10,560
Speaker 1: will be reached. Obviously, there's always the possibility that a

164
00:10:10,600 --> 00:10:13,840
Speaker 1: broad restructuring could go ahead and be reached and you know,

165
00:10:13,920 --> 00:10:17,440
Speaker 1: everything will get sewn up pretty quickly. However, you know,

166
00:10:17,559 --> 00:10:20,480
Speaker 1: history has shown, especially in this case, which is much

167
00:10:20,520 --> 00:10:23,000
Speaker 1: more than a three ringed circus in wheer go ahead

168
00:10:23,000 --> 00:10:27,720
Speaker 1: and orchestrate, that it's quite difficult. And so the likely um,

169
00:10:27,760 --> 00:10:30,720
Speaker 1: you know, possibility is going to be that the Congress

170
00:10:30,760 --> 00:10:32,559
Speaker 1: is either going to have to come together with respect

171
00:10:32,559 --> 00:10:34,920
Speaker 1: to some sort of law that is going to be

172
00:10:35,000 --> 00:10:38,959
Speaker 1: imposed on the island, or that we're going to get

173
00:10:38,960 --> 00:10:42,520
Speaker 1: to a messy default here in July. Thank you very much.

174
00:10:42,600 --> 00:10:48,280
Speaker 1: David's how president co founder Magdalen Capital speaking about Puerto

175
00:10:48,360 --> 00:10:51,520
Speaker 1: Rico and it's a debt crisis. If you're listening to

176
00:10:51,559 --> 00:11:03,199
Speaker 1: taking Stock on Bloomberg Radio, coming up on taking Stock,

177
00:11:03,400 --> 00:11:07,280
Speaker 1: a new look at fiduciary rules. What do changes in

178
00:11:07,320 --> 00:11:10,800
Speaker 1: fiduciary rules coming from the Department of Labor mean for

179
00:11:10,840 --> 00:11:13,160
Speaker 1: your retirement. We've got details